FSC to approve Bank of China’s participation in yuan-based derivatives market

[THE INVESTOR] The Bank of China, one of China’s four major state-owned banks, has decided to participate in yuan futures market launched by the Korea Exchange last year, sources said June 20.

Financial Services Commission, Korea’s top financial regulator, is expected to give a preliminary approval to the Seoul branch of BOC soon as the bank applied for operation license to trade yuan-based derivatives products here in March. 

Once the Chinese bank receives the green light, the Korean authority will conduct an on-site inspection to check on its computerized management system and risk management system before giving its final approval.

In a bid to enhance variety and trading opportunities in the country’s derivative market, the KRX launched a new product lineup of Chinese yuan futures in October in 2015.

But the trading volume has remained sluggish as major Korean companies prefer transactions in US dollars and the low demand in futures trading for currency hedge.

“We expect that the Chinese yuan futures market will be expanded given that the country is putting all out efforts to internationalize yuan and the growing importance of Korean firms’ trading with China,” a KRX official said,

Currently, three local brokerages -- Daishin Securities, NH Investment & Securities and Mirae Asset Daewoo -- offer liquidity for yuan currency futures trading.

By Park Han-na (hnpark@heraldcorp.com)